Are Realtors Free? Episode #349

Todd: We will talk about the buyer side. Person wants to go buy a house. They have a choice. They can either drive around and call off the signs or they can go hire an agent to show them houses.

Oana: Right.

Todd: So from that perspective, is there like an added cost or is the realtor pretty much free?

Oana: A realtor is pretty much free to a buyer.

Todd: OK.

Oana: OK. What a realtor gets paid is wrapped up in the whole transaction, same thing with the title fees, escrow fees and all that. It’s kind of all wrapped up in a transaction.

Todd: OK. So there are some agents who will charge a minimum commission.

Oana: Absolutely. That makes a lot of sense because you have to keep in mind, if you’re looking at a lower price point, it’s not economically feasible for an agent to spend their time helping you purchase that unless you make it worth their while.

Todd: Right.

Oana: So that’s when the commission comes in. Don’t be afraid of that. It’s actually a good thing because that means that that agent is working for you and is working for you to buy the house at the lowest possible price because now they’re no longer incentivized as a percentage of the purchase price but rather off a pre-agreed upon amount.

Todd: OK, good. I can do a whole other video just on that topic.

Oana: Yes.

Todd: So let’s talk about a listing now because that always is the debate. At a listing appointment, seller always wants a discount or – not always but half the time, they want to negotiate the commission. So how does that work if they just try to sell it on their own versus hiring an agent?

Oana: Look, the bottom line is the reason why the system works with agents the way it does is because agents have access to a lot more avenues to get your property exposed to the market.

Todd: OK.

Oana: It’s simply logical that the more people are exposed to your property, the more likely it is for you to get a higher price for the property. So if only 10 people look at your house, you’re going to get less money for the house than if 100 people look at your house.

Todd: Yeah, for sure.

Oana: Because you’ve got more competition now. The idea is that the more eyeballs we get on your house, the more people we can get coming into your house. They go look at it. The more offers we collect for you, the better off you are because you are in a stronger negotiation point and you get more money for the house.

As far as the cost that you’re incurring on the realtor side, it’s all about the net. It doesn’t really matter. Look, if you’re selling your house for $500,000, and on your own you could get 450 but with a realtor you’re going to get 500, and the realtor is costing you $20,000, you’re still walking away with more money than you would if you were selling it on your own.

Focus on the net. Don’t worry about the gross. Don’t worry about the costs. Worry about what you will actually walk away with. It’s always about the net.

Todd: I think the biggest thing when it comes to free or whatever is that people forget that that 500 number is not like some government stamp of value that that’s what the house is worth. That’s what an agent marketing the house, marketing to other agents with all their buyers was able to obtain for the house.

There’s also another price out there called the FSBO price which is the price you’re likely to get if you put a sign in the yard and just have random people come by, unqualified people, people who don’t have an agent because agents won’t work with them because they’re not – they can’t ever get a loan. They want to do special deals. They want to lowball all the houses. They tend to not be legitimate.

NAR statistics were 86 percent and 92 percent. That’s what a FSBO gets. So I believe personal opinion – of course I’m a realtor. Not only are we not free. We add value, more than any cost.

Oana: Right. I mean generally speaking, when somebody is looking on Craigslist and they find a for-sale-by-owner on Craigslist, they’re going to take 10 percent off the top because their thing is well, this is a for-sale-by-owner so there’s hardly something wrong with the house and on top of that, I get to discount six percent because he’s not paying commissions and on top of that I get to discount because now I’m doing more work and more research on my own. So by the time it’s all said and done, I’m discounting 10 percent.

So it doesn’t really make sense to go with a loan for a lot of reasons. Another reason why it doesn’t make sense to go with a loan is right now in Nevada, legislature is in session and as the saying goes in Nevada, whenever the legislature is in session, nothing is safe.

So there are lots of new forms, lots of new laws, that even for-sale-by-owners have to comply with and as we all know, ignorance of the law is not an excuse. You do have to comply and you just don’t know because you don’t make it your business to keep up with all the new laws and all the new forms, all the new disclosures, lots of new disclosures that sellers have to do.

So an agent not only gets you more money for the house but also protects you legally because that way, you’re compliant with everything and lastly, you’re going to have your home exposed to more buyers. Your home will sell faster for more money and your life will be easier and that’s what you want. You want easy transaction with the most money with the least liability.

Todd: OK. So I think the answer to the question of, “Are realtors free?” is simply that realtors add value to both the buyer and seller.

Oana: Yes.

Todd: And we’re not a cost – a lot of people are just negative and everything is a cost. We actually do add value. There’s a reason to hire us just like you would hire a doctor versus trying to perform your own appendectomy.

Oana: Agreed.

Todd: OK. Good. All right. So that’s the video for today and hope to see you on another video. Thanks.